[Congressional Record Volume 148, Number 137 (Thursday, October 17, 2002)]
[Senate]
[Pages S10708-S10709]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. SESSIONS (for himself, Mr. Grassley, and Mr. Leahy):
  S. 3139. A bill to provide a right to be heard for participants and 
beneficiaries of an employee pension benefit plan of a debtor in order 
to protect pensions of those employees and retirees; to the Committee 
on the Judiciary.
  Mr. SESSIONS. Mr. President, I rise today to introduce The Employee 
Pension Bankruptcy Protection Act of 2002. Today, when a company 
declares bankruptcy, it is often the employees and retirees who suffer. 
They suffer because they often loose their hard earned pensions and 
retirement benefits during the bankruptcy process. This is simply not 
right. When Americans loose the pensions and benefits that they have 
worked a lifetime to earn, it is the responsibility of the members of 
this body to take notice and to act to protect them.
  The bill I introduce today does one very simple thing it gives 
employees and retirees the right to request that they be represented 
before the bankruptcy court, the same kind of representation that 
protects the rights of others that are owed money by the corporation. 
Under this bill, a representative of the employees and retirees can 
appear and be heard if it is likely that the employee benefit pension 
plan of the bankrupt corporation will be terminated or substantially 
underfunded and if it is possible that the beneficiaries of the plan 
will be adversely affected.
  By allowing employees and retirees to be represented before the 
bankruptcy court, we will ensure that the bankruptcy court hears from 
the people who entrusted their retirement savings to their employer. 
Employees and retirees will be able to argue to the court that any 
division of assets or bankruptcy plan must be fair to the pensioners. 
The needs of the corporation's employees and retirees should be heard 
BEFORE the assets of a bankrupt corporation are split up among 
creditors and lost forever. They deserve to have their day in court.
  It has only recently been brought to my attention that under current 
law, employees and retirees are not represented before the bankruptcy 
court as creditors. Legally, the pension fund is the ``creditor'' of 
the corporation, not the employees and retirees. Thus, the pension 
interests of employees and retirees are represented in the bankruptcy 
process by a trustee of the pension, if one exists, or by the PBGC, if 
it takes over the pension fund.
  Because PBGC, under its governing statutes, can not guarantee the 
full benefits of the pension plan, but can only guarantee the statutory 
amount, significant portions of hard earned pensions can remain unpaid 
when a company goes bankrupt. While the PBGC is often able to pay most 
of the pension benefits when a company goes bankrupt, in certain cases 
the statutory limit can be much lower than the pension payment the 
employee or retiree was promised by the corporation. Employees and 
retirees deserve more than this. They deserve the additional 
representation before the bankruptcy court that this bill provides if 
their hard earned pensions and retiree benefits are to be adequately 
protected.
  I would like to thank Mr. John Nichols of Gadsden, AL, and his son, 
Phil for bringing this to my attention. The ordeal faced by Mr. 
Nichols, is a prime example of why employees and retirees need more 
representation before the bankruptcy court. Mr. Nichols spent his 
entire career at a steel plant in Gadsden. He began working for 
Republic Steel in 1956 and stayed with the company through two 
ownership changes and a buyout by LTV Steel.
  When LTV bought out Mr. Nichols employers, LTV Steel took over the 
monthly pension payments guaranteed to the former employees and 
retirees of Republic Steel, including Mr. Nichols. Soon after the 
takeover, however, LTV filed for bankruptcy, claiming that it could 
no longer make pension payments to Republic Steel's former employees. 
PBGC, the Pension Benefit Guarantee Corporation stepped in to help LTV 
make a small part of the pension payments, but LTV eventually stopped 
making payments at all.

  Because all the payments LTV had been making were not guaranteed by 
the PBGC, the long awaited pension payments earned by Mr. Nichols and 
by Republic Steel's other loyal employees were severely reduced. Mr. 
Nichols' pension payments went from $2,225.00 to $675.00--only 30 
percent of what he had been promised. A third of this payment now 
covers Mr. Nichols' health insurance premium that he can no longer 
purchase through LTV, leaving him with only 20 percent of his promised 
pension each month. PBGC could only pay the retirees the amount their 
statute allowed, and no one had the responsibility of going to the 
bankruptcy court and telling them what was happening to the retirees of 
Republic Steel. PBGC itself recognized that the claims of the 
pensioners against LTV, ``are among the many claims that will probably 
never be paid, except perhaps in cents on the dollar'' and stated that 
PBGC's claim against LTV for the pension plan underfunding was perhaps 
``[t]he largest of these claims [that will go unpaid].''
  During LTV's bankruptcy case, various creditors were represented 
before the bankruptcy court, but not the employees and retirees. Thus, 
when the assets of LTV were divided among its creditors, employees and 
the retirees were not at the table. If the employees and retirees had 
had an opportunity to make their case before the bankruptcy judge, the 
result could have been different.
  The Employee Pension Bankruptcy Protection Act of 2002 seeks to make 
sure that what happened to the retirees of Republic Steel will never 
happen again, employees and retirees will never be deprived of their 
pensions without having their day in court. While a company may still 
be able to discharge its obligation to pay pensioners in bankruptcy, 
this bill at least takes the first modest step to protect pensioners by 
providing them the opportunity to be part of the bankruptcy bargaining 
process. Before the bankruptcy court sells assets or adopts a plan of 
reorganization, the employees and retirees will be heard. After all, it 
is their money. This is only fair.
  I strongly urge my colleagues in the Senate to support this bill and 
to work with me to further ensure that employees and retirees of 
corporations are fairly treated and protected under the United States 
Bankruptcy Code.
  I ask unanimous consent that the text of the bill be printed in the 
Record.
  There being no objection, the bill was ordered to be printed in the 
Record, as follows:

                                S. 3139

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. SHORT TITLE.

       This act may be cited as the ``Employee Pension Bankruptcy 
     Protection Act of 2002''.

     SEC. 2. PURPOSE AND INTENT.

       The purpose and intent of this Act is to provide employees 
     and retirees with a greater likelihood of having outstanding 
     pension

[[Page S10709]]

     liabilities paid by a corporation that files for bankruptcy 
     by allowing the employees and retirees of that corporation 
     the right to be heard before the bankruptcy court.

     SEC. 3. RIGHT TO BE HEARD.

       Section 1109 of title 11, United States Code, is amended by 
     adding at the end the following:
       ``(c) In a case in which the debtor is the sponsor of an 
     employee pension benefit plan pursuant to section 3(2) of the 
     Employee Retirement Income Security Act of 1974 (29 U.S.C. 
     1002(2)), and such plan is likely to be terminated pursuant 
     to title IV of that Act or substantially underfunded by the 
     debtor resulting in a hardship to the participants or 
     beneficiaries, a representative of the participants (as 
     defined in section 3(7) of that Act) and beneficiaries (as 
     defined in section 3(8) of that Act) who are entitled to 
     benefits under such plan and who may be adversely affected by 
     events in the case, may appear and be heard with respect to a 
     sale of all or substantially all of the assets of the debtor 
     or with respect to a plan of reorganization, provided that 
     such participants and beneficiaries may employ counsel and 
     other professionals who shall be compensated from the estate 
     of the debtor.''.
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